Mexico 2012 Full Year Analysis

Mexico closes the top 10 largest markets for Fiat-Chrysler. It is considered one of the slowest among fast-growing car markets in the world, but last year it showed that is back on the scene once again. After some years of crisis, as consequence of its strong dependence on US economy, Mexican car market closed the year with almost 1 million units, making of it the second largest market in Latin America. As it happens in Brazil, Argentina and other car markets in that continent, total new car sales are still very low compared to their total populations. That’s why it is another big market with big potential in coming years. Fiat-Chrysler is present thanks to Chrysler Group and the factories it has there, from where they export not only to North America, but also Europe, Asia and Latin America. Mexico is a key market for Fiat-Chrysler, not only because of its local demand, but because it is the place where they can make their products really global.

Mexico

There are 110 million people living in Mexico and only 1 million bought a new car last year. This car market makes part of NAFTA, North American Free Trade Agreement, which is one of the largest trade zones in the world. Mexican products have free access to US and Canada markets, and this is one of the reasons so many car makers operating in USA moved production of their cars to Mexico, where labor costs are lower, but quality is as good as in the developed world. That’s why is easy to find a Mexican-made car in Europe, USA or even Asia. Besides, Mexico has become a production hub as its governments have signed several free trade agreements with many countries in the world. Thus, Mexico exports 2.4 times more what it sells locally. In 2012, there were almost 2.9 million cars produced there, up 13%. It was the third largest car producer in the Americas, after USA and Brazil, and ahead of Canada and Argentina. More than 83% of that production is exported to USA, Canada, Brazil, Colombia, Argentina, Chile, Europe, China, Australia, and some other markets. Local demand is also in a very good momentum: up 9%, and gets close to the million units and 2007 record of 1.1 million cars sold.

Mexican car market heads again to 1 million unit mark. Notice that its performance is quite similar to US market. Thanks to excellent and cheap labor costs, this country has become a production hub for several auto makers looking to export not only in NAFTA countries, but in LATAM, Europe and Asia. Source: AMIA, AMDA, Carsitaly.net

Source: ADEFA, AMDA

The market is mainly dominated by local producers: Nissan, VW, Chrysler, Ford and GM. All of them are very strong but highly dependent on American demand. Nissan is the leader of the market with 1 out of 4 cars sold in Mexico. GM and VW follow, while Chrysler is behind with almost 10% share. Notice that Mexico is one of the last markets in the world where Hyundai Motor doesn’t have a direct presence. Hyundai sells some of its products through Chrysler dealerships in an agreement signed by both companies some years ago. That’s how Mexicans can buy the Hyundai i10, i25 or H100 in Chrysler dealerships using Dodge brand. Even if these Hyundais are some how popular in Mexico, their sales results are not enough to place Hyundai as an important player in Mexico. Regarding segmentation, there isn’t enough data to make a deep analysis, but it is clear that B and C-segment cars are the most popular in this country. Some of the best-selling cars in Mexico are updated versions of old models, such as the Nissan Tsuru (the Sentra from the 90’s) and the VW Clasico (the first Bora).

Fiat-Chrysler

Chrysler de Mexico is one of Mexico’s largest car producers. In 2012 Fiat-Chrysler produced more than 450.000 cars, from which 93% were exported. The excellent results of Fiat 500 in America, and the big demand of Dodge Journey/Fiat Freemont made Toluca plant to increase its output by 34% in 2012. That’s a big jump compared to poor results in Europe. This could be one of the reasons of Fiat’s decision of moving Fiat 500 production from Mexico to Poland once the new generation arrives in late 2016. In terms of sales, the group occupied place #4, after Nissan, VW and GM. In 2012 Fiat-Chrysler surpassed Ford, but this result must be carefully analyzed. If Hyundai cars are included in the total, then the group sold more cars than Ford. But if the Dodge i10, Attitude and H100 are not included (as they are pure Hyundai models), then Fiat-Chrysler sales would really total around 70.000 units, far behind Ford, but still ahead of 6th place occupied by Toyota. This difference should be considered as those cars are not really Chrysler models. However, as there is no official information about the units sold, is hard to make the analysis without them.

Chrysler Group counted for 94% of the group’s sales. Its sales includes Hyundai sales as they have an agreement in which Chrysler sells and distributes 3 Hyundai models. Fiat brand had a big jump thanks to the 500 made in Toluca. All the production was exported mainly to USA (53%), Brazil (20%) and Canada (10%). Alfa Romeo sold only 93 units in a million units market. Source: AMIA, AMDA

Thanks to the extraordinary performance of Dodge Journey and Jeep Patriot, the group increased its share in almost 1 bp. Nevertheless, it is still far from the group’s target of 11% by 2014. Things may get even better this year thanks to the arrival of Dodge Dart, which is going to be the first C-Segment car the group offers since the Neon died some years ago. The Journey is the absolute leader of its segment and became Mexico’s 14th best-selling car. Then comes the Patriot with more than 8 thousand units sold, up 2%. From their yearly change it is evident that a big part of the group’s growth in 2012 came from Hyundai models. The Compass is another key player with more than 5 thousand (e) units sold. But the rock star of the year was the Fiat 500, that finally took off with circa 3.300 units. It means that this little car counts for 67% of the brand’s sales in Mexico. This model helped the brand to increase its sales by 95% and get close to Peugeot. The problem with Fiat brand is its image among Mexicans. The brand left the country twice before its come back with Chrysler. It had a very bad effect on its reputation. Besides, most of the offer comes from Brazil, and these are cars with a different approach in terms of quality. Alfa Romeo’s position is even worse. Its reputation is OK, but as it happens in Argentina and Colombia, after its introduction in Mexican market, its sales reached a top in 2012, but they are still marginal compared to other brands. This is because of lack of new models (this is why I think Alfa Romeo should wait till it has more models to start business in Brazil).

The locally made Journey was the best-selling model of the group in Mexico, and the best-selling big MPV in overall market. This model is exported to USA, Canada and LATAM using Dodge logo. It is exported to Europe, Brazil and China using Fiat logo. Source: AMDA. Thanks to my friend Domenico from AutoItalian for the information.

The Patriot is another important model for the group in Mexico. It sold more units there than in Canada, but is behind the Honda CR-V and the Ford Escape, which will increase its sales thanks to the new generation. Source: AMDA

Estimations based on some monthly reports by Chrysler de Mexico. The i10 and Attitude are very popular, but at the same time they are direct rivals of Fiat products. Notice that the cars are exactly the same of Hyundai models and they don’t even change the logo. Is it good for brand image? Source: Chrysler de Mexico

Estimated sales based on Chrysler de Mexico monthly reports. 2 out of 3 Fiats sold in Mexico correspond to the 500 model, which finally took off, but is still far from the leaders of the segment (the 500 is much more expensive). The Chrysler 200 did well but occupies place #5 in its segment. Source: AMDA

My Forecast 2013

Mexican car market faces one big problem for its future growth: imported used vehicles. AMIA, Car Industry Mexican Association, indicates that more than 450.000 used cars will be imported this year, which had, according to them, a bad impact on the economy (the industry loses 300.000 employs) and environment. If Mexican car market wants to become even larger it must change this policy of used vehicles. Wherever there is this kind of imports, the market is severely affected (Peru, Bolivia, Africa). However in 2013 the industry should be selling around 1.1 million cars, up 11%. Mexican economy depends a lot on USA. Therefore, there are no reasons to believe that economic situation in North America will get bad in 2013. Current conditions favors local demand and somehow exports (that will be affected by Brazil’s new policies on imported cars and Europe’s collapse). Fiat-Chrysler is supposed to increase its share according to the group’s objectives. I think they will be able to do it based on the arrival of the new Dart, Grand Cherokee, Compass, and Cherokee. Fiat brand should continue gaining market share but will slow down as its latest launches may not have the demand expected.

All models should benefit from the good momentum in Mexican car market. The new Dart and Cherokee and the updated Grand Cherokee should boost strongly the sales of Chrysler Group. The 500 should continue to increase its registrations, but not its brothers from Brazil and Italy (the Punto is imported from Italy).